Harding's Conflict of Interest

Saying he wanted to set things straight right from the start, Russell Harding sat down on the day he took the reins of the City's Housing Development Corporation and wrote a one-page memo to the agency's general counsel. In no uncertain terms, Harding recused himself from having anything at all to do with matters at the agency involving his father's influential law firm, Fischbein Badillo Wagner & Harding.

In the June 1, 1998, memo, Harding wrote that he was excusing himself from "any business, action or decision by the corporation with respect to any person or entity" represented by the law firm. And he didn't mince any words about why he was doing it. "I have elected to recuse myself . . . since my father, Raymond B. Harding Esq., is a partner in such firm."

There were plenty of good reasons for Russell Harding to want to head off any such problems. Not only was Raymond Harding a partner in the law firm, he was also the leader of the Liberal Party and the political mentor for his son's ultimate boss, Mayor Rudy Giuliani. Raymond Harding joined Fischbein Badillo in 1994, the year Giuliani took office, teaming up with former Giuliani running mate Herman Badillo. Since then, business had boomed, with clients ranging from contractors after city awards to companies after city tax breaks beating a path to the firm's door. In 1993, the firm had just three lobbying clients; by 1998, it had more than 60.

The firm became an embarrassing issue for Giuliani in 1997, after reports in the Daily News and The New York Times detailed the lawyers' special access to the administration. Giuliani distanced himself from the firm, saying no one needed to hire it. Raymond Harding and Badillo voluntarily agreed to forgo personally lobbying Giuliani aides, although Fischbein Badillo, using other attorneys, continued its thriving practice.

In his memo, Russell Harding carefully prescribed a remedy if any conflict with Fischbein Badillo did arise, stating that HDC's board chair and general counsel would take over in any matters involving the firm.

The potential for conflict thus addressed and the memo appropriately filed, Harding then proceeded to ignore itpushing ahead five multimillion-dollar deals for a client of his father's firm.

Just two months later, on August 6, 1998, Harding placed a $9 million financing package for a development client of Fischbein Badillo before the corporation's board of directorscomposed of mayoral and gubernatorial appointeesand asked them to approve it.

In a memo addressed, "To The Chairman and Members, From Russell A. Harding," he sought board approval for tax-exempt bond issues and low-interest loans for three projects developed by L&M Equity Associates, a politically active Westchester-based developer.

The projects were worthy endeavors: They proposed transforming abandoned buildings in the South Bronx and Harlem's Bradhurst section into subsidized, low-cost rental apartments. They would also pay the developers handsomely, providing estimated fees of almost $800,000, not including profit on the construction.

The board unanimously approved the resolution, and corporation staff set about drawing up the necessary legal paperwork with attorneys from Fischbein Badillo Wagner & Harding.

Four months later, at the HDC board's December meeting, Harding again violated his own conflict-of-interest declaration. He presented the board with another L&M project for funding approval, a Bedford-Stuyvesant Brooklyn development that sought $4.3 million in agency tax-exempt bond funding. It was also approved, and Fischbein Badillo Wagner & Harding served as counsel for that project as well.

In June 1999, Harding presented yet another L&M project to the board. Saying he was "pleased to recommend" the project to the board, Harding asked for $8.6 million in tax-free bonds and low-interest loans to help the developer renovate an abandoned casket factory on Brook Avenue in the South Bronx into affordable apartments. Again, Harding's dad's law firm represented the developer.

Minutes of the meeting show that a potential conflict of interest was raisedbut not by Harding. Instead, it was board member Charles Moedler, a real estate attorney appointed by Governor Pataki, who recused himself from voting on a different matter because his firm had represented one of the parties. Harding never mentioned his own conflict issue, according to the minutes.

Harding is a college dropout with no housing finance background, and once the funding for projects was approved, he played little role, as his staff handled the complex bond and mortgage deals. But if he had scant involvement in day-to-day agency financial business, he delighted in ribbon cuttings, and a year later, when the casket factory project was complete, Harding tossed a party to celebrate. He had the agency print up an invitation to the opening of the complex, called Brook Avenue Gardens, and faxed it to a list of invitees. Among those on the list were three attorneys from his father's firm.

The program called for Harding, L&M Equity principal Ron Moelis, and several others to address the gathering. As the Voice has reported ["The Private Lives of Russell Harding," June 18], two days after the ribbon cutting, Harding allegedly told a friend during an online chat that he had "made a few extra dollars on the deal" from the contractors and was going to spend the money gambling "rather than declare it on my taxes."

Harding's attorney, former John Gotti defense counsel Gerald Shargel, has denied that his client took any money from contractors. Developer Moelis also denied it. "I gave him nothing," said Moelis, who said he missed the ribbon cutting because of a scheduling conflict.

But the matter is one among many now being examined by the city's Department of Investigation and the Manhattan U.S. Attorney in a joint probe of Harding's activities that ranges from expense-account abuses to sending child porn over the Internet.

As for the firm of Fischbein Badillo, a spokesman for Raymond Harding said its dealings with the housing corporation were proper and the law firm never pressed HDC for business for its clients when Russell Harding was president. "There was no lobbying, and no contact with Russell Harding was ever made," said George Arzt, the spokesman.

Moelis said he retained Fischbein Badillo in the spring of 1998 at the urging of an old college friend who had joined the firm. "It was completely unrelated to Russell Harding," he said. When he realized the firm's connection to the corporation's new president, Moelis said he asked for guidance from the firm and HDC. "I was told it wasn't a problem," he said.

Harding's only involvement, said Moelis, was arranging ribbon cuttings for the projects. "He was very involved with the [public relations] aspect," he said. "He wasn't a numbers guy. He was someone you avoided."

It wasn't the first time the issue of potential conflict with his father's law firm arose for Harding. In his previous post with the Giuliani administration, Harding served as vice president for communications at the city's Economic Development Corporation, where more than a dozen Fischbein Badillo clients had business. In May 1997, a reporter called Harding to ask him how he was handling the matter.

"I'll tell you how I handle it," a clearly peeved Harding responded, and then rattled off the name and number of an aide who handled press calls. When the press spokesperson failed to respond, the reporter called Harding again. The vice president listened for a moment and then said, "We're not having this conversation." And hung up.